On Friday (September 6th), spot gold fluctuated narrowly in the Asian market, currently trading around $2517.22 per ounce, holding most of the overnight gains. Gold prices rose to a near week high on Thursday, as signs of the labor market losing momentum led investors to expect the Federal Reserve to make a massive interest rate cut this month due to the weakening of the US dollar and declining yields.

The number of private employers recruiting in August in the United States was the lowest in three and a half years, which may indicate a sharp slowdown in the labor market. The data from Wednesday showed a sharp decline in job vacancies in the United States in July.

Phillip Streible, Chief Market Strategist at Blue Line Futures, said that the surge in gold prices after the release of ADP data does indicate that "the labor market is in a critical state, and people are very concerned about it

The ADP National Employment Report released on Thursday showed that private employment positions increased by 99000 in August, the smallest increase since January 2021. The growth rate in July was revised down to 111000, compared to the previous value of 122000. Economists previously predicted an increase of 145000 private employment positions in August.

Dragged by the data, the yield of US treasury bond bonds fell on Thursday, and the yield of interest rate sensitive two-year bonds hit a 15 month low.

The yield of interest rate sensitive two-year treasury bond fell 1.6 basis points to 3.754% late Thursday, hitting 3.713% earlier, the lowest since May 2023. The yield of 10-year treasury bond fell 3.2 basis points to 3.736% on Thursday, the lowest since August 4, falling to 3.721%.

The report from the Institute for Supply Management (ISM) shows that employment in the US service industry cooled in August, but it has not yet hinted at a sudden slowdown in the labor market.

The Institute for Supply Management (ISM) announced on Thursday that the non manufacturing Purchasing Managers' Index (PMI) rose slightly to 51.5 in August, compared to 51.4 in July.

A PMI above 50 indicates growth in the service sector, which accounts for over two-thirds of economic activity. ISM believes that in the long run, a PMI index above 49 usually indicates that the overall economy is expanding. Economists previously predicted that the service sector PMI would drop to 51.1. The report, combined with strong consumer spending in July, indicates that the economy continues to expand, albeit at a slower pace compared to last year.

The unemployment rate surged to a nearly three-year high of 4.3% in July, sparking concerns about an economic recession and raising expectations that the Federal Reserve may significantly lower interest rates by 50 basis points when it initiates its easing cycle this month.

According to the CME FedWatch tool, traders currently believe that the probability of the Federal Reserve cutting interest rates by 25 basis points this month is 59%, and the probability of a 50 basis point rate cut is 41%.

The new order index surveyed by ISM rose from 52.4 in July to 53.0. The employment index of its service industry decreased from 51.1 in July to 50.2.

The labor market is slowing down, but it has not deteriorated significantly. The data released by the government on Wednesday showed that there were 1.07 job vacancies per unemployed person in July, lower than 1.16 in June.

The inflation rate of the service industry remained almost unchanged last month. The ISM service industry input price index rose slightly from 57.0 in July to 57.3. Due to rising borrowing costs suppressing demand, price pressures in the economy are weakening.

ADP data performed poorly, dragging down the US dollar index by 0.23% on Thursday, marking two consecutive trading days of decline. The intraday low reached 100.95, closing at 101.06. However, data on Thursday showed that due to the still low number of layoffs, the number of initial jobless claims in the United States decreased last week. This limited the downward space of the US dollar and also put pressure on the gold price to retrace during Thursday's trading session.

As of the week ending August 31st, the number of initial applications for unemployment benefits from the state government decreased by 5000, to 227000 after seasonal adjustment, which is the lowest level since early July. Economists previously predicted 230000 people.

People have a vague feeling that the economy is about to decline, but the latest data does not show this, "said Adam Button, Chief Monetary Analyst at Forexlive in Toronto." I think the market will struggle at every data point whether to cut interest rates by 25 or 50 basis points.

The initial application for unemployment benefits report can help alleviate people's concerns about the deteriorating labor market.

San Francisco Fed President Daley said on Wednesday that the Fed needs to cut interest rates to maintain the health of the labor market, but now it depends on the upcoming economic data to determine the magnitude of the rate cut.

People's attention will shift to the non farm payroll report (NFP) to be released on Friday.

According to a Reuters survey, it is expected that employment growth will heat up in August, with an expected increase of 160000 non farm jobs for the month, surpassing the 114000 increase in July. The unemployment rate is expected to drop to 4.2% in August.

From a technical perspective, after gaining support near the middle of the Bollinger Bands, gold prices have risen again, not only regaining the 2500 mark, but also the 5-day and 10 day moving averages. Short term bullish signals have strengthened, and we need to be wary of the possibility of gold prices breaking historical highs again. But the MACD green bar is still there, and there is still a possibility of high volatility and peak building in gold prices. We need to guard against the possibility of gold prices rising and falling, and pay attention to the support around the 10 day moving average of 2509.27 and the 5-day moving average of 2504.33.